India's E-Commerce Startups Slow To Hire As Sector Growth Stagnates

Employees in the office of Myntra, a unit of Flipkart, in Bengaluru. In July, Flipkart-owned Myntra acquired Jabong from Global Fashion group, a move that marks the consolidation mode of e-commerce companies. (Photo courtesy Bloomberg)

Right on the heels of the report that India is the third largest tech startup hub in the world, with the U.S. and the UK occupying the top two positions, comes the news that a number of people joining the country's e-commerce sector have reduced by more than half.

This is, in all probability, a drift towards correcting an overdone hiring boom. With the slowed capital flow, experts say it’s a year of adjustment, introspection, and consolidation for startups.

Since the beginning of this year, e-commerce companies have not shown much enthusiasm in hiring job aspirants from the country's much sought after business management schools. Barely 50 students from the Indian Institute of Management in Bangalore, were hired this year. With the last quarter of 2015 seeing layoffs, rapid downsizing in startups such as FoodPanda, Tinyowl, and Housing.com, and the closures of web-only women fashion brand DoneByNone and food tech startup Dazo, e-commerce companies have been treading cautiously.

Furthermore, since many startups have not been able to drum up investor enthusiasm for later funding rounds, even the salaries of top management have flattened out. From a peak of about $596,343 (INR 40 million) annually, the compensation is now down to about $305,696 (INR 20.5 million). Salary increases for new hires have slumped to 8-20% in the last few months from 50-60% in the last two years, while a few senior-level managers have taken pay cuts in exchange for stable jobs.

According to a survey by Belong, a Bengaluru-based recruitment company that works with Snapdeal and Flipkart among many others, the number of people joining the e-commerce sector has decreased by 61% between November 2015 and April 2016.

As domestic giants Flipkart and Snapdeal are struggling to raise money and grappling with spending cuts, and other fledgling ventures have pared jobs and seen valuations fall, the appeal of working for them has been going down drastically among job aspirants.

In an already cash-constrained ecosystem, there was a 66% decline in the first round of VC funding, according to startup data provider VCCEdge, in the first four months of 2016, compared with the 2015 corresponding period. It is the lowest in six years. Also, after building up their market shares and making their presence felt, many companies are in a consolidation mode. Last month, Flipkart-owned Myntra acquired Jabong from Global Fashion Group for an undisclosed amount, a move that marks further consolidation in India's e-commerce industry. Myntra was acquired by Flipkart in 2014 in an estimated INR 200 million deal.

There has also been a 78% drop in space being leased by e-commerce companies this year. E-commerce firms took up about 4.2 million square feet of the total of 17.5 million square feet of space in the first half of 2015. However, in the same period this year, it consumed only about 0.9 million square feet of the overall consumption of 20 million square feet, a Knight Frank report said.

But on the positive side, Belong's data also showed that the number of employees in B2B companies increased by 32% during November 2015 to April 2016, compared to the six-month period before that. The difference in trends between B2C and B2B is attributed partly to the fact that pure B2B companies do not have a labour-intensive model.

Although exciting startups will continue to be created this year, “small is safe” is likely to be the defining theme for funding, with early-stage investors turning cautious and an overall tightening of purse strings.

I am interested in ideas and enterprises -- in all shapes, sizes and guises, whether well-cooked or medium-rare. After working for most of my career in Dubai in different newspapers, including Gulf News, I relocated to India and worked for The Times Group in Pune. During my ...